What will happen to GBP/CAD exchange rates after the Tory leadership contest?
Over the last 8 weeks the pound has gradually been losing value against the Canadian dollar. 8 weeks ago GBP/CAD mid-market exchange rates were above 1.77 and now mid-market levels are trading just above the 1.6350. To put this into monetary value a CAD$300,000 purchase now costs clients an additional £14,000. The question many of my clients are asking is whether the pound will fall further once the Tory leadership contest is over in 2 week’s time?
Now that we know the next Prime Minister will be either Boris Johnson or Jeremy Hunt, my personal opinion is that Boris poses a short term risk to the pound as he has stated the UK will leave the EU by the end of October with or without a deal. Whereas Jeremy Hunt could provide a boost in the pounds value as he also has stated with a heavy heart he will take the UK out of the EU without a deal, but he has announced a new negotiating team will get a deal over the line.
Boris Johnson still favourite to take No. 10
The problem for the clients that are buying Canadian dollars is that the bookmakers and polls are suggesting the 160,000 Tory members will support Boris Johnson. A survey of 1,470 Conservative Party members had Boris Johnson at 67.4%, Jeremy Hunt at 29.1% and 3.6% abstained from voting as they wanted neither. In addition, according to odds checker yesterday, bookmakers have Johnson at 95.2% and Hunt at 5.9%.
Tory election TV debate tonight
This evening the two MPs will go head to head in a TV debate on ITV. Many broadcasters are suggesting Boris character will be questioned once more, but as long as he comes out unscathed then he will find himself taking over no10 come the 23rd July. If this materialises I expect the pound will remain under pressure against the Canadian dollar for the time being, at least until a formally response comes from the EU.
If you are buying Canadian dollars short term, the Tory leadership contest I believe is a risk. If you are comfortable with current mid-market levels, then I would recommend getting in touch to confirm the actual trade levels if you have an upcoming currency transfer. You can contact me directly using the form below.